Tuesday, 22 September 2015

How investors can get ready for the first US rate hike

Interest rates are surely going to rise; it isn't a matter of "if" anymore but merely a matter of "when." 
Investors may believe that they want to exit the stock market in anticipation of rising interest rates, preferring to commit funds to the "safer" bond market. In more normal market conditions, that would be a prudent strategy. 
Today, however, I believe that there is more risk in the bond markets than in the stock market. 
The bond market is largely about mathematics. There is an inverse relationship between bond prices and interest rates. 
When rates rise, bond prices fall. With rates at historical lows, there is only one direction for interest rates to trend and that is upward.


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